92% of Homes Now Have Equity

About 256,000 U.S. homes regained equity in the third quarter of this year, bringing the total number of residential properties with equity to about 46.3 million, according to CoreLogic's latest equity report. That equates to about 92 percent of all mortgaged homes.

What is equity?

In the context of real estate, the difference between the current fair market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. Also referred to as “real property value.”

The number of residential properties in negative equity dropped to 8.1 percent, or 4.1 million, in the third quarter, down 20.7 percent year-over-year, according to CoreLogic's report. Negative equity refers to properties where borrowers owe more on their mortgage than their homes are currently worth.

"Home-price growth continued to lift borrower equity positions and increase the number of borrowers with sufficient equity to participate in the mortgage market," says Frank Nothaft, chief economist for CoreLogic.

In the third quarter, about 37.5 million borrowers had at least 20 percent equity, up from 35 million a year ago. In the last three years, the number of borrowers with at least 20 percent equity has climbed by 11 million, "a substantial uptick that is driving rapid growth in home equity originations," Nothaft says.

The bulk of properties with positive equity is concentrated in the high-end housing market, CoreLogic's report notes. Ninety-five percent of homes that are valued at $200,000 or more have equity compared to 87 percent of homes valued at less than $200,000.

Home prices are expected to rise at least 5 percent in 2016 and continue to build wealth among home owners in the new year, says Anand Nallathambi, president and CEO of CoreLogic.

What are homebuyers doing with their equity?

Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property's increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.

"People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they're capitalizing on the strength of home-price appreciation," says Ben Graboske, senior vice president at Black Knight Data & Analytics.

Over the past year alone, mortgage borrowers have collectively gained about $1 trillion in home equity. Those doing cash-out refinances are taking an average $65,000 individually — about on par with the boom times of 2006. However, the volume of cash-out refinances is nowhere close, remaining 80 percent below the 2005 peak. Read more.